When it comes to selecting great stocks to own, I always start by looking at market leaders. After all, companies that sit at the top of their industry should be doing something right that enables them to command that leadership position. Nike (NYSE:NKE) is one such company within the sports footwear and apparel industry. It has been able to grow its global market share in athletic footwear from around 16.8% in 2011 to around 27% in 2019. 

Even when Nike was faced with tough challenges last year brought about by the COVID-19 pandemic, the company managed to post a credible performance for its fiscal 2020 earnings, with revenue falling just 4% year over year to $37.4 billion despite the temporary closure of the majority of its global stores. 

With the pandemic still raging in many parts of the world, can Nike still manage to navigate rough seas to post steady growth? Does this qualify the sports giant as a buy?

Man tying shoelaces with a bottle of water beside him

Image source: Getty Images.

Digital sales momentum

One aspect that stands out for Nike is its commitment to digital initiatives. The company has invested time, money, and effort in building a strong digital platform that served it well when the pandemic hit. For its fiscal 2021 second quarter (which ended Nov. 30), digital sales rose 84% year over year, with the North America segment posting triple-digit percentage growth.

CEO John Donahoe mentioned on the company's latest earnings call that Nike has now enjoyed three consecutive quarters of 80% year-over-year digital growth, a testament to the strength of its digital platform. The company is also actively engaging its audience through social media platforms, with 7 billion brand impressions generated across different media during the quarter.

Donahoe is confident that the shift to purchasing online and using digital resources is a permanent trend, and Nike is well-positioned to capture this shift and maximize opportunities to increase its loyal customer base.

Innovative product pipeline

Nike is still doing what it's best at -- introducing innovative and cutting-edge products that continue to wow its customers. The second quarter saw the launch of basketball sneakers LeBron XVIII and Kyrie 7, both of which have been very well received. The company is also expanding its women's maternity wear collection and plans to increase its assortment of sizes for its kids wear division.

Nike's latest release, the ZoomX Invincible Run, combines cushioning, stability, and fluid dynamics to create a shoe that promises to protect runners from injury and also improve running efficiency. And four years after Nike released its first self-lacing shoes, the company is now releasing new self-lacing Air Jordan shoes that allow the wearer to customize their fit and feel.

This stream of new footwear releases underscores Nike's commitment to refreshing its product portfolio and keeping one step ahead of its competition.

Burgeoning member base

Building up a strong member base is important for any brand, and Nike does this extremely well. Since the pandemic began, Nike has added more than 70 million new members globally. Donahoe also reports that buying member growth (i.e. members who spend using Nike's apps) is running ahead of new and active member growth, a sign of strong conversion that bodes well for the company.

Nike held its first-ever members days and offered exclusive merchandise and rewards for participation, resulting in high levels of engagement and strong sales conversion. This constant engagement with customers will endear them to the brand and result in larger basket sizes over time, while the offer of rewards should incentivize members to continue buying digitally, thereby boosting digital sales further.

Nike's best days are still ahead

Nike has shown that it still has what it takes to grow, despite one of the biggest crises humanity has faced in a century. Revenue for the six months of fiscal 2021 grew 4% year over year, while net income jumped 12% year over year. In a show of confidence, management has announced a 12% increase in its annual dividend to $1.10 per share, and the company now has the enviable track record of raising its dividend for 19 consecutive years. 

I firmly believe that Nike's best days are still ahead. The company has successfully adopted an omnichannel retail strategy that includes its physical stores layered over with its online presence. By establishing a strong connection to customers, the company can generate lasting loyalty, and the apps also make it easier for the company to do product launches and send through customized marketing and promotional materials. Nike's competitive moat remains as strong as ever, and it's a stock you should consider adding to your investment portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.